Can behavioral science help end poverty? We think so, and we have a few ideas.
First, we need to recognize why many of our best-intentioned efforts have failed. Too often, we’ve watched novel initiatives move directly from hypothesis to solution, without being rigorously tested and refined. Without adequate insight into human behavior and scientific experiments, this has led to a slew of disjointed, repetitious, and often inefficient programs that haven’t made much progress in the now decades-old War on Poverty. Now, more than ever, we cannot afford to cut corners. Over 45 million Americans are living below the poverty line—just $23,550 for a family of four. More than a third of those Americans (16 million) are under the age of 18. Meanwhile, since the end of the Great Recession, families at the top of the income spectrum have recovered while families at the bottom have seen their real incomes continue to fall. This is tragic, but in light of recent research, not surprising.
As Harvard economist Sendhil Mullainathan and Princeton psychologist Eldar Shafir—both advisors to ideas42—laid out in their book Scarcity, lacking critical resources like money or time has a significant effect on how we behave and make decisions. Because poverty is a form of chronic scarcity, these findings point us toward a two-part hypothesis about the persistence, or ‘stickiness’, of poverty that is worth testing: first, poverty is a context—an environment—that drives behavior in predictable ways, and second, key changes to that context can help lift people out of poverty.
There’s ample evidence to support the first part of the theory. We know that having to worry about money can lower your IQ. We know excessive stress caused by poverty exacerbates the cognitive biases we all have, like favoring immediate rewards over long-term benefits. We know that having to carefully track each penny you spend depletes your ability to carry out more important tasks.
We don’t yet know, however, what to do in response to these findings. Our next step, then, must be to test whether, and how, contextual changes can make a lasting and positive impact in the lives of people with low incomes. Based on insights from Scarcity and other behavioral research, a team of us from ideas42 recently released a white paper that is both a call to action and a blueprint for a poverty-alleviation innovation program. The paper outlines three principles for designing services and programs that account for the context of poverty and (we hypothesize) would markedly improve outcomes for families with low incomes. Here are the principles in brief:
- Cut the costs: Living in poverty costs more money, time, and mental energy, yet services targeted toward people with low incomes often drive up these costs. For example, with less access to traditional financial instruments, people living in poverty pay a premium to cash their checks, pay their bills, and access credit. They also pay more in time and mental “bandwidth” to stretch inadequate budgets and access services through multiple bureaucracies. We believe strategically reducing or eliminating these unnecessary costs will free up critical bandwidth for much more important activities like pursuing a degree or helping with homework. Because the costs imposed are numerous, so too are the opportunities to intervene. Interventions that might greatly relieve the pressure of some of these added costs include a “Common App” that streamlines the public benefits application process, or the consolidation of services into one-stop shops for families in need.
- Create slack: Compounding the costliness of chronic scarcity is a lack of slack. When you’re living on the financial edge without a safety net, even small shocks can be disastrous, and seemingly insignificant risks can feel impossible to tolerate. When a middle-class family’s child gets sick or their car breaks down, they likely have the financial slack to cover the associated costs. For people with low incomes, these unexpected and unavoidable incidents become crises. Lost days of work and unforeseen bills mean tapping into next month’s budget or borrowing money at whopping interest rates. We believe that providing more slack—whether it comes in the form of money (e.g. flex funds for emergencies) or time (e.g. car or laundry services)—will give families the room to thrive. More slack means more bandwidth, more risk tolerance, and, again, improved outcomes.
- Reframe and empower: We know people’s behavior is driven by their perceptions of themselves, their environment, and the people they interact with. Even subtle cues can have significant effects. Unfortunately, the context of poverty is often toxic: social stigma, unpleasant interactions, and internalized stereotypes are all pervasive, and they all negatively affect actions in the present and beliefs about the future. For one, think about the mandatory drug screenings, budgeting classes, and stringent application criteria often required to access public benefits. Or, think about the often-neglected facilities and inefficient public services present in low-income neighborhoods. Apart from imposing time and energy costs, these signals send a demoralizing message that can inculcate a second-class identity. We believe thoughtful design aimed at reducing stigma and promoting dignity and autonomy can counteract those forces in ways that will help families better achieve their goals.
It’s time to put some of these ideas into action, and to test our hypotheses in the real world. We know that context matters. We know that the context of poverty shapes decisions and actions. Now we owe it to ourselves to find out how changing that context in ways that account for the known and predictable effects of scarcity can change the lives of people for the better.